Middle East Conferences: Copper concerns

The timing couldn’t have been better for a discussion on the volatile nature of the copper and copper scrap market, which was held during the recently concluded 2014 Middle East Metals Recycling Conference, in Dubai, March 2-3.

The panel, which consisted of two significant consumers of copper scrap in Europe as well as a large Middle East copper scrap recycler, agreed that demand for the metal has been significant over the past several years. At the same time, more recent trends are pointing to challenges. One sector that generated a significant amount of discussion was the growing concern that China, far and away the largest consumer of copper and copper scrap, was in the midst of economic challenges and was sharply reducing its intake of the red metal.

In his presentation, Marc Gascon with La Farga Group, a Spain-based manufacturer of semifinished copper products and alloys for the electrical, metal packaging, railway, piping, automotive, billets and special conductors markets, offered an overview of the company, which produces 210,000 metric tons of copper products per year. Gascon noted that La Farga uses a significant amount of copper scrap to make its finished products.

He said that because of the softer economy, less scrap was being generated. However, he said demand for copper products remained strong. At the same time, more copper consumers are focusing their attention on copper scrap as a raw material, he added.

Another factor driving the copper market has been consolidation in the scrap metal industry. This move is putting greater pressure on the red metal, he added.

China is a large consumer of birch/cliff copper scrap, while high grades such as millberry and candy/berry are being consumed by domestic industries, Gascon said.

Regarding China’s economy, Gascon said financial markets, which helped drive copper to record prices several years ago, are getting out of the metal, which could send copper plummeting hard.

Also discussing the copper market from a European perspective was Marcus Kartenbeck, executive director of Germany’s Aurubis AG, a copper smelting and recycling company. The company operates five facilities throughout Europe and treats more than 650,000 metric tons of copper per year.

Kartenbeck offered his thoughts on the different approaches taken to recycle copper, which include using advanced techniques and what he called “backyard recycling.” Kartenbeck, who said that Aurubis is the largest copper scrap recycler in the world, uses state-of-the-art technology and the highest environmental standards to obtain its copper scrap. Meanwhile, the less sophisticated approach uses rudimentary techniques, which are often manual treatments that can be hazardous, he said. The result is high metal losses and recovery of only single metals.

As for copper scrap trends, despite recent challenges with China, Kartenbeck said he expects copper scrap demand in China to grow 4 percent per year from 2013 to 2018, reaching 1.771 million tons by 2018. For the Middle East, he also predicted strong growth of 4 percent per year over the next five years. One of the key drivers for the robust growth in the Middle East is the development of burgeoning economies, which will require greater amounts of copper to build out their country’s infrastructure, he added.

He added that he expects the United States to increase its copper demand by 2 percent per year, while Europe will increase by 1 percent and South America will increase by 3 percent per year.

Kartenbeck said the significance of recycling and closed-loop raw material recycling in the copper market will continue to increase. Also, international competition on the copper market is becoming more and more intense and is influenced by competitive distortions in some cases. Finally, he added, “Sustained success in the copper scrap market requires the use of various success factors, which Aurubis believes it is well-positioned in the area.”

Following a look at the copper market from the consumers' perspective, the copper session concluded with an outlook of Muzammil Haji Amin, a top executive with the metals recycling company Ala Group. The company is one of the largest scrap metal recyclers in the Gulf Cooperation Council (GCC) region of the Middle East.

Amin noted that generation of copper scrap in the Middle East and Africa has been growing quite significantly, with more than 12 million metric tons per year of copper scrap generated in the Middle East and Africa.

While Amin said that copper scrap was in significant supply in the region, “More than 90 percent of the scrap generated is exported to smelters and foundries outside the region.”

The reason behind the optimistic outlook for copper scrap in the GCC is the booming construction and tourism sectors and related infrastructure projects. Meanwhile, some North African and inland countries are encouraged to take advantage of GCC port operations and near zero duty for exporting copper scrap, Amin said. Meanwhile, the installation of auto shredders in the region as well as developing economies throughout the GCC are generating ignificant amounts of copper scrap in the region.

With most of the copper scrap generated in the GCC being exported, scrap metal recyclers in the region have become more attuned with demand trends from India and China. Global copper consumption is estimated to be more than 21 million metric tons in 2014, with more than 60 percent of the metal consumed in Asia, Amin said.

At the same time, construction, power, transportation and consumer electronics sectors will continue to drive demand for copper and result in an increase in the import of copper scrap to India and China, he said. Meanwhile, favorable environmental regulations and lower labor costs encourage the setting up foundries and smelting plants to process scrap in the region.

Finally, near zero-freight to Asian countries from the GCC is boosting exports of copper scrap while also benefiting the export of semifinished and finished products, which will encourage greater consumption.

The Middle East Metals Recycling Conference was held at the JW Marriott in Dubai, March 2-3, 2014.